Birds fly, fish swim—regulators regulate.
I'm sure they mean well. British regulators, in their recent decision to record bank employees work cell phones must have lofty goals. For example: Protecting the investing public—and the economy at large—from rogue traders and corrupt bankers. But does anyone expect it to work?
“We expect the rules to increase the volume and quality of information available to us to use as additional evidence in insider trading cases,” Sarah Bailey, a spokeswoman for the F.S.A. said.
It makes you wonder if the following thought ever crossed the collective mind of the F.S.A.: Illegal trades executed on bank mobile phones were place there precisely because those lines are not recorded; and if those mobile lines were recorded, the trades would be placed on a different line.
Perhaps it has. The New York Times article points out that there would be a requirement for “firms to take reasonable steps to ensure that such communications do not take place on private communication equipment that firms cannot record mainly for privacy reasons.”
Two things: 1) How on earth are you going to ensure that? Short of setting up magnetometers and airport style security at the door of every investment bank in Britain, it's going to be next to impossible to keep people off their mobile phones; and 2) The F.S.A communiqué seems to strike a note of almost palpable melancholy that "private communication equipment" cannot be recorded —"mainly for privacy reasons."
Which brings me to the broader point: Proposals like this one erode privacy, cost banks a small fortune—and will likely have a negligible impact on preventing actual fraud.
The net effect will likely be that a huge amount of personal conversation will be swept up in a vast electronic listening apparatus. The costs banks will incur, in terms of both initial outlay and ongoing maintenance, will be substantial. Finally—and most important—dedicated fraudsters and actual criminals will have lots of lead time to figure out how to perpetrate their scams before the policy is implemented.
If you begin recording conversations on mobile phones belonging to banks, corrupt traders will use personal cell phones; if you begin recording personal cell phones, corrupt traders will 'accidentally' bring spouse's cell phones to work. And so on.
And as there is no limit to criminal ingenuity, so too there is no end in our willingness to believe that facile technical solutions can solve the intractable problem of human nature.
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